Chicagoan Renewing Fight To Erase Redlining

July 07, 1985|By Stanley Ziemba, Urban affairs writer.

Ten years ago Gale Cincotta took her neighborhood fight against mortgage redlining to the U.S. Congress and emerged with legislation that has dramatically increased the availability of home mortgage loans in inner-city neighborhoods, according to the Chicago housewife-turned-act ivist.

The legislation, the Home Mortgage Disclosure Act, requires banks and savings and loan associations to disclose by census tract where they make home loans.

Such disclosures, according to Cincotta, have been used by community groups across the country in obtaining at least $450 million in funds from lending institutions for inner-city reinvestment, including more than $170 million in Chicago.

Furthermore, the disclosure law, while not eliminating redlining on the part of lenders, has at least uncovered some of the more blatant uses of the tactic, Cincotta said. Redlining is a systematic refusal by some financial institutions to make mortgage or home improvement loans to people in areas they consider blighted.

Today Cincotta, who heads National People`s Action, a Chicago-based umbrella group of neighborhood organizations, and other neighborhood activists across the country are again knocking at Congress` door, urging re-enactment and strengthening of the disclosure law.

The current legislation is scheduled to expire Oct. 1 and, according to its proponents, unless it is renewed and expanded to account for changes in the banking industry, a new wave of redlining is likely.

A bill to renew it and make it a permanent law has been introduced in the Senate by William Proxmire (D., Wis.). The House Banking Committee is expected to vote on a similar bill Wednesday.

``Ten years ago, we needed the Home Mortgage Disclosure law to stabilize and improve our neighborhoods,`` said Cincotta, who helped begin the movement in the West Side neighborhood of Austin. ``Today in light of federal spending cutbacks for housing and banking deregulation, we need it just to survive.

``The Home Mortgage Disclosure Act and the Community Reinvestment Act are the only tools communities have to know what their bankers are doing, to bring them to the negotiating table and to persuade them to lend in our neighborhoods,`` she said. The Community Reinvestment Act was passed by Congress in 1977 to ensure that lending institutions meet the credit needs of the communities they serve.

Cincotta and National People`s Action have been fighting redlining for the last two decades, contending that it is one of the primary reasons for the decay of inner-city neighborhoods.

Before successfully lobbying for federal anti-redlining legislation, Cincotta and her group succeeded in the early 1970s in getting the Chicago City Council to pass a law requiring lending institutions that have city funds on deposit to disclose their lending activities.

To strengthen the federal disclosure law, National People`s Action and its research arm, the Chicago-based National Training and Information Center, are proposing that it be extended to cover home loans made by mortgage-lending subsidiaries of bank holding companies. These mortgage banking firms, which have recently been providing an increasing number of home loans, are currently exempt from the legislation.

The two organizations also are seeking new provisions in the law that would require financial institutions to disclose where they make commercial and industrial loans, and reveal where their deposits come from by census tract.

``Such disclosures would help neighborhood groups and federal and state banking regulators to better determine whether a financial institution is meeting all the credit needs of the neighborhoods from which it draws its depositors,`` Cincotta said.

When the disclosure law was proposed 10 years ago, the banking and savings and loan industry strongly opposed it as an unnecessary intrusion on business. The financial institutions denied the contentions of social activists that their refusal to grant loans in certain neighborhoods was the reason those areas decayed. Instead, they said, the neighborhoods already were in decline before funds were denied.

Today, the industry still opposes the legislation but not as vocally. The American Banking Association contends the law should be allowed to expire because it duplicates the anti-redlining provisions of the Community Reinvestment Act. If it is renewed, the association contends that it should not be made a permanent law and that the amendments sought by National People`s Action should not be passed.

Cincotta, however, contends that without complete disclosure of loan and deposit data, community groups will not be able to identify the credit needs of their neighborhoods, negotiate loan programs with lending institutions and monitor their success.

``The sad fact is that redlining by the financial institutions still exists in every city in the country,`` Cincotta said. ``Most low-income areas receive less than 10 cents out of every dollar that goes into housing loans.`` In a recent study of lending in Chicago, she noted that the National People`s Action found that lending institutions averaged 50 loans to upper-income areas for evry 6 granted to low-income areas.

``If there is any question why our country is experiencing a crisis in housing stock loss, displacement and homelessness, you don`t need to look any further than the banks` own loan disclosure for an explanation,`` she said.